US alternative asset manager Kohlberg Kravis Roberts is ramping up its efforts in the European credit market and has begun talks with investors about raising a direct lending fund for mid-market companies in the region.

KKR bolsters European lending plans

KKR executives have held a series of meetings with potential investors and advisers ahead of raising a dedicated European credit fund, according to four people familiar with the matter.

If raised, the credit fund could further spur the growth of Europe’s institutional lending market. In recent years, private debt funds including BlueBay Asset Management and Intermediate Capital Group have raised European credit funds, while CVC Credit Partners, the lending arm of buyout giant CVC Capital Partners, recently started raising its first direct lending fund, of €400 million.

A spokeswoman for the firm declined to comment.

Executives at Avoca Capital, the Dublin-based credit manager acquired by KKR in October last year, are also involved in the plans, said two of the people. Another person familiar with the matter said Johannes Huth, KKR’s Europe, Middle East and Africa head, had mentioned the fund in recent investor meetings.

KKR is targeting between €1.5 billion and €2 billion for the direct lending fund, according to two people.

In February, KKR completed the acquisition of Avoca, and said it would use the manager to expand in European credit. At the time, the firm’s co-founders, Henry Kravis and George Roberts, said they believed European credit offered a “significant opportunity”, and added that $2 billion had been deployed by the firm in the past two years. In the past, New York-listed KKR has financed lending to European companies using its balance sheet. KKR has already begun lending to European mid-market companies. In April, Jesús Olmos, who heads KKR’s Spanish operations, told the Wall Street Journal that the firm was looking to issue loans of more than $100 million to small and medium Spanish companies.

KKR has signalled its intent to capitalise on the lack of bank lending in Europe and is keen to grow assets under management by building its European direct lending capability, the people said.

Related

In April, Scott Nuttall, global head of capital and asset management at KKR, said in the group’s quarter one earnings call: “We do see an opportunity in Europe for direct lending. So that would be one strategy I think now, with the combined capabilities, is something we are likely to prioritise in the near term.”